The Effects of Industrial Park Development on Export Earning, Employment and FDI Attraction: Evidence from Ethiopia

Abstract

This study examines the effects of industrial parks on export earnings, employment creation, and FDI attraction in Ethiopia. Furthermore, the study aims to identify the constraints and potential to achieve sustained and dynamic results expected from the industrial park development. Despite varying degrees of successes and failures, several countries have utilized industrial park and other types of special economic zones as a policy instrument for fostering economic transformation. Ethiopia is one of the African countries that have adopted industrial park development as a policy tool to enhance its economic growth and transformation. However, the effect of the industrial park policy initiative of the country is not well researched. The analysis of the study reveals that industrial parks in Ethiopia have contributed statistically significant effects on export earnings, employment creation, and FDI attraction with significant levels of p= <.001. The analysis also showed that the top five binding constraints for the effectiveness of the industrial park development are low labor productivity, domestic raw material supply constraints, weak forward and backward linkage, transport cost and logistic constraints, and institutions’ capacity constraints. On the other hand, the availability of a trainable labor force, raw material potential, preferential policies and incentives, the economic growth of the country, and the labor wage rise in China and other emerging countries are identified as the top five potentials and opportunities to achieve sustained and dynamic benefits of industrial park development in Ethiopia.